Tesco has agreed to sell its businesses in the Czech Republic and Slovakia to a Dutch supermarket giant for €1.7bn (£1.5bn).

The UK’s largest grocer said today it would sell its operations in the two European countries to Ahold Delhaize for €1.7bn (£1.5bn), in what marks the company’s latest retreat from the global expansion it had pursued in recent decades.

Tesco chief executive Ken Murphy said the move would help the supermarket chain to ramp up its focus on the UK market, where grocers are battling to keep prices down in the face of rising energy and supply chain costs.

Murphy said: “It has been a privilege to serve customers and invest in colleagues, stores and supply chain in the Czech Republic and Slovakia and we are proud of what has been achieved over the past 30 years.

“For Tesco, the transaction will further simplify the Group, increasing our focus on our core UK and Irish businesses and supporting our continued investment in our food-first retail ecosystem and the capabilities that will drive future growth, while enabling a further return of capital to shareholders.”

Ahold Delhaize, which owns 17 supermarket brands including Albert Heijn in the Netherlands and Food Lion in the US, will take control of Tesco’s Czech and Slovak stores in the second half of next year.

Tesco winds down global reach

In the last year, Tesco’s operations in these two countries produced £2.9bn in sales and most of the £115m operating profit generated by its “central Europe” arms. The group has 184 stores in the Czech Republic and 179 in Slovakia.

The supermarket giant operates a further 198 locations in Hungary, and reports earlier this year suggested it was seeking a buyer for this business too. But Tesco said on Friday: “Hungary is not part of today’s agreement and continues to be owned and operated by Tesco. We will continue to review all options for the future of our business in Hungary.”

Frans Muller, chief executive of Ahold Delhaize, said: “This acquisition is an important step in strengthening our position in the Central and Southeastern European region.

“It brings together highly complementary businesses with strong local market expertise and gives us the opportunity to expand into Slovakia, an attractive adjacent market.”

Analysts at stock broker RBC said: “We think that much of [Tesco’s] value has been in the UK&I business in recent years, and central Europe has had its challenges and hence we are encouraged by the reduced exposure there.”

Tesco’s exit from the Czech Republic and Slovakia follows a number of similar retreats in recent decades. The group has already withdrawn from France, Japan, Malaysia, Poland, South Korea, Thailand, Turkey and America.

The supermarket quit its US experiment in 2013, selling off all remaining Fresh & Easy stores, and the accounting scandal that nearly sunk the firm accelerated its turun inwards in 2014. Tesco’s Thai and Malaysian operations were sold for £8bn in 2020.

This moves have unwound the ambitious expansion plan set out by former Tesco chief executive Sir Terry Leahy, who said in 2007 that the group was looking to expand “everywhere”. He had said: “We are on the threshold of becoming one of the few successful international retailers. There’s plenty to do.”

The group’s European division accounted for £4.5bn of its £66.6bn total revenue last year and was recently described by Murphy as an “integral part of the group”.

Shares in Tesco gained one per cent in early trading, to 536p.